Does it bother you that FAANGs make up over 10% of the S&P 500??

[Oz investor]

I have always thought about equal weight indexes. I believe they compare favorably to the cap weighted ones.

with equal weight ETFs the devil is in the details

one ( almost ) certainty is highly expenses ( higher transaction costs compared to a proper passive fund )

the potential upside is frequency of re-balances ( taking some profits , and reducing loss potential ) the EW fund i am looking at re-balances every two months compared to 3 months and six monthly in my two main index funds

not so easy to understand but will be useful for some folks

 

[UnrealizedPotential]

Sounds like your need for income has you pretty well diversified.

That's part of it. Also, I don't want to be caught in a market correction where everything just tanks. I've been there. It's no fun at all. So I want at least a chance I won't get killed like I did in 2008. I can't take that kind of risk anymore.


Eventually I recovered from 2008, but mentally thinking about stocks I am in a different place now. I am not working anymore, but relying solely on my portfolio for income. That is a huge difference.

 

[ExFlyBoy5]

I am personally torn about putting a large chuck of change into equities, but holding on to a bunch of cash isn't smart, either (for me of course).

Since my pension covers all our "normal" expenses and I am still fairly young, I am being swayed to a 85/10/5 AA but not sure exactly where I want the 85%. I was originally thinking of a total stock market index, but they are heavily weighed w/ FANG. I also have to deal w/ my Dad's brokerage account that is heavy in equities, but they are all individual stocks (most are dividend paying)..not sure if I am going to leave them as is, or move them into an index.

Ugh...so much to consider.

 

[ERD50]

...

Ugh...so much to consider.

Not if you follow a Couch Potato philosophy!

-ERD50

 

[audreyh1]

I am personally torn about putting a large chuck of change into equities, but holding on to a bunch of cash isn't smart, either (for me of course).

Since my pension covers all our "normal" expenses and I am still fairly young, I am being swayed to a 85/10/5 AA but not sure exactly where I want the 85%. I was originally thinking of a total stock market index, but they are heavily weighed w/ FANG. I also have to deal w/ my Dad's brokerage account that is heavy in equities, but they are all individual stocks (most are dividend paying)..not sure if I am going to leave them as is, or move them into an index.

Ugh...so much to consider.

Personally I hold large cap, medium cap, small cap, international and REITs in my equity AA and rebalance between them, so as a result the FANG influence is not overwhelming.

I think folks have shown how the influence of top components of the S&P500 changes dramatically over time. What dominates today probably won’t five years from now as the ETF site illustrates.

 

[nash031]

It bothered me so much that I bought more AAPL in 2013 in addition to my VTSAX holdings. The result? AAPL has risen 3x the S&P during that time. AAPL was undervalued for a long time after 2008. It's possibly still trading a little below its intrinsic value.

That said, I have a sell plan, but we're still somewhat short of the price target, so I'll continue to hold.

 

[Lsbcal]

Does it bother me about those FAANG stocks ... not too much. I don't like to see excesses but I've designed my strategy since 2009 to take advantage of such trends. They don't end because we individually get cold feet.

Right now in my large caps it's all in VUG and VOO (Growth Index and SP500). If the trend shifts it will go towards value and international large cap. Hopefully when it shifts it will do so in a somewhat gradual fashion but no way to figure this ahead of the markets.

 

[mpeirce]

It bothered me so much that I bought more AAPL in 2013 in addition to my VTSAX holdings. The result? AAPL has risen 3x the S&P during that time. AAPL was undervalued for a long time after 2008. It's possibly still trading a little below its intrinsic value.

That said, I have a sell plan, but we're still somewhat short of the price target, so I'll continue to hold.

Yeah, I think along these lines too.

I have a (used to be small) IRA account that I allow myself to play in a bit. I bought Netflix when it swooned down to $83. After it more than doubled, I sold half and held the rest. It's now just over of $400. (I bought it because I know people there and it's been a well run company and didn't believe the mini-crash was warranted)

I also picked up some Amazon at $790 and it's now over $1700.

And I'm FIREd now because of AAPL.

Tech is a fascinating sector and I love it!

(That being said, the vast amount of my holdings now are in broad indexes like Vanguard Total Market and a couple of international index funds.)

 

[copyright1997reloaded]

So let's say by magic the components of FAANG all lose half their market cap in an instant, while the rest of the market magically stays even. The result in the S&P 500 would be a 5% loss. Not the end of the world.

My largest single stock holding is Apple. It didn't start that way, it started as a modest purchase of 100 shares at $19/share in October of 2000. It was an undervalued, cash rich company then...and remains so now.

 

[flintnational]

I can't participate in a meaningful manner to this thread. I told my DFIL his Netflix stock was overvalued at $115. Currently it is trading at $414. So much for my knowledge about stock picking and FAANG stocks.

PS - So, in the future if I provide individual stock advice run away. Run far away!

 

[Hamlet]

I can't participate in a meaningful manner to this thread. I told my DFIL his Netflix stock was overvalued at $115. Currently it is trading at $414. So much for my knowledge about stock picking and FAANG stocks.

PS - So, in the future if I provide individual stock advice run away. Run far away!

I think you'll probably be proven right about Netflix eventually. They are a cash-burning business. Ultimately, they are selling dollars for 90 cents.

It doesn't matter how much your customers like your business if you are charging them less than it costs you to provide the service they are buying from you. That generally ends badly.

 

[samclem]

It doesn't matter how much your customers like your business if you are charging them less than it costs you to provide the service they are buying from you. That generally ends badly.

It can work out okay as a long-term strategy if the biz is building market share, driving out rivals, and creating some sort of mote that allows them to have pricing power in the future. That's been Amazon's game for a long time, we'll see if it ultimately proves successful. But I agree that, given the other players and changing technology, it seems unlikely Netflix will be able to do this in their niche.

 

[ExFlyBoy5]

It bothered me so much that I bought more AAPL in 2013 in addition to my VTSAX holdings. The result? AAPL has risen 3x the S&P during that time. AAPL was undervalued for a long time after 2008. It's possibly still trading a little below its intrinsic value.

That said, I have a sell plan, but we're still somewhat short of the price target, so I'll continue to hold.

You bought in 2013? Have you held onto it ALL (AAPL) since then? What is your target? $1000? I had a fair amount of AAPL but when it had DOUBLED, I sold most of it. I am a firm believer in the pigs/hogs analogy.

 

[USGrant1962]

I think you'll probably be proven right about Netflix eventually. They are a cash-burning business. Ultimately, they are selling dollars for 90 cents.

It doesn't matter how much your customers like your business if you are charging them less than it costs you to provide the service they are buying from you. That generally ends badly.

I’m not following you. I’m no fan of their valuation but they have been profitable for a number of years and TTM earnings are $1.49/share. How is that selling dollars for 90 cents?

 

[underwrite]

I can't participate in a meaningful manner to this thread. I told my DFIL his Netflix stock was overvalued at $115. Currently it is trading at $414. So much for my knowledge about stock picking and FAANG stocks.

PS - So, in the future if I provide individual stock advice run away. Run far away!

Lol. Ouch.

 

[underwrite]

So let's say by magic the components of FAANG all lose half their market cap in an instant, while the rest of the market magically stays even. The result in the S&P 500 would be a 5% loss. Not the end of the world.

My largest single stock holding is Apple. It didn't start that way, it started as a modest purchase of 100 shares at $19/share in October of 2000. It was an undervalued, cash rich company then...and remains so now.

Good points.

 

[underwrite]

Yeah, I think along these lines too.

I have a (used to be small) IRA account that I allow myself to play in a bit. I bought Netflix when it swooned down to $83. After it more than doubled, I sold half and held the rest. It's now just over of $400. (I bought it because I know people there and it's been a well run company and didn't believe the mini-crash was warranted)

I also picked up some Amazon at $790 and it's now over $1700.

And I'm FIREd now because of AAPL.

Tech is a fascinating sector and I love it!

(That being said, the vast amount of my holdings now are in broad indexes like Vanguard Total Market and a couple of international index funds.)

Wow. Nice trades.

 

[underwrite]

That's part of it. Also, I don't want to be caught in a market correction where everything just tanks. I've been there. It's no fun at all. So I want at least a chance I won't get killed like I did in 2008. I can't take that kind of risk anymore.


Eventually I recovered from 2008, but mentally thinking about stocks I am in a different place now. I am not working anymore, but relying solely on my portfolio for income. That is a huge difference.

Definitely. I’m still working, but would rather avoid another full roller coaster ride like we experienced during the financial crisis.

I’d rather have lower volatility even if my gains are reduced.

 

[gerntz]

Won't surprise me if down the road some of the fangs aren't broken up due to being monopolies. Read something recently about 90%+ of online searches are done on one of the fangs.

 

[nash031]

You bought in 2013? Have you held onto it ALL (AAPL) since then? What is your target? $1000? I had a fair amount of AAPL but when it had DOUBLED, I sold most of it. I am a firm believer in the pigs/hogs analogy.

I bought some in January ($554 - $79 split adjusted) and some in August ($478 - $68 split adjusted). Made sense to me to buy more of something I thought was undervalued at $550 when it dropped an additional 20%. It's now just up over $190, about 10% over my value calculation. I'll look to sell when it's closer to 25% overvalued by my numbers, so target sell is ~$217 (split adjusted ~$1500) or higher for now. That value changes, obviously, with earnings numbers, etc. and I'm not firmly tied to it. If it continues its present run-up north of $200, I may well consolidate those gains. Otherwise, I'd be fine with holding AAPL longer if it works out that way. I had no money to buy when I first heard about the iPod back in 2003, otherwise I'd probably be retired by now.